CSG admits more needs to be done as profit remains in the red
- 20 August, 2019 12:09
CSG has closed the 2019 financial year with loss after tax of $1.8 million, considerably less than the previous year when the company posted $150 million loss.
Revenue was down three per cent to $217 million as a result of lower than expected print equipment sales in New Zealand (NZ) which was offset by increased print equipment and display equipment sales in Australia.
CSG also faced a decline in print service revenue of 6.3 per cent and decline in finance revenue. It continued to invest in the technology as a subscription strategy in Australia and New Zealand with total technology revenue up $2.6 million to $46.6 million.
Technology subscription revenue grew by 17 per cent, with seats growing by approximately 18 per cent in FY19 to 24,180.
The growth in technology subscription revenue is a result of an increased focus on its core managed IT offering to the SME sector, including an increased penetration of its cloud subscription offering in Australia.
As part of this focus, on 31 December 2018, the group divested its pcMedia Education subscription business in NZ and also transitioned 753 Communication as a Subscription seats in NZ to third party support through the second half of FY19.
"Adjusting for the sale of pcMedia, there were 3,689 net subscription seats added in FY19, growth of 18 per cent," the company told shareholders.
"Earnings in the technology business were impacted by the ongoing investment in the Australian sales team, but this investment positions the Australian Technology business to return to profitability in FY20."
Acting CSG CEO and managing director, Mark Bayliss admitted there was more work to be done and there are "a number" of strategic priorities for FY20 including improving customer experience, accelerating technology growth and share of earnings, improving cash conversion and working capital efficiencies, and delivering sustainable growth in earnings.
"We have grown CSG to be a stronger company over FY19 and have put in place the foundations for sustainable future. We are confident that we have the right strategy in place and, if we execute, we will achieve double digit percentage EBITDA growth in FY20," Bayliss added.
The CSG 2021 program announced earlier has resulted in a restructure that saw the business focus on SME market among other things.
"These initiatives are driving improvements in CSG’s financial performance," Bayliss said.
"Quality of revenue is improving with a focus on generating profitable revenue, underlying earnings grew substantially, the balance sheet has been strengthened following the capital raising that was completed earlier in the year, and cash generation was significantly improved.
"There is still a lot of work to do to achieve our CSG 2021 Program goals, but we enter FY20 as a substantially stronger Company, positioned well for further growth, and excited by the growth opportunities we see for this business."
CSG underlying earnings (EBITDA) saw a 71 per cent increase to $17.1 million.
Meanwhile, the company appointed Gavin Gomes, former executive general manager at Canon Australia, as executive general manager for print and technology operations in Australia.
"A significant amount of work has been completed over FY19, and there has been substantial change within CSG. We implemented a new strategy that overhauled our sales and marketing, our customer profitability, our IT systems, as well as a number of changes to people and culture," Bayliss said. "These have delivered early benefits and will enable growth in the business going forward."